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Oil Sees A Dead Cat Bounce?

COMMODITIES
  • Oil has bounced after Friday's rout as markets further assess the impact of the Omicron variant. WTI is back above $70 but remains more than $8 below Wednesday's high. The bounce has been concentrated in front-ended contracts and is more modest further out the curve, suggesting there hasn't been a sea change in sentiment.
  • WTI is up +4.2% on the day at $71.0 but remains clearly vulnerable. It cleared $69.58 on Friday (61.8% retracement of Aug-Oct rally), which potentially opens up the first firm support level of $67.4 (Nov 26 low). * Brent is up +3.1% on the day at $75.0. First support is $71.9, the 61.8% retracement of the Aug - Oct rally, whilst first resistance is $77.58 (Nov 22 low).
  • There has been little immediate reaction to Biden saying "the US won't need shutdowns, lockdowns this winter", potentially offset by the US Energy Envoy saying just beforehand that further releases from the oil reserve are possible.
  • Earlier, Iran's Foreign Minister said Tehran will not accept any request beyond JCPOA, helping support the bounce rather than driving it.
  • Separately but as expected, the Saudi Energy Minister said the OPEC+ meetings have been shifted, with the technical meeting now on Wed and the ministerial committee on Thu.
  • Additional USD risk tomorrow with Powell testifying before the Senate at 1000ET/1500GMT. Biden will unveil a strategy for dealing with the variant on Thursday.
  • Gold meanwhile remains under pressure, down -1% at $1784. It's towards the lower end of last week's range and closing in on the support level of $1778.7 (Nov 24 low).
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